Plaintiff informed the Defendants that a deal to buy Ciga Hotels, located in Italy might be possible.
*fn2"
(Compl. PP 9-10.) On July 1, 1993, Defendant Cryan wrote a letter agreeing to pay a "commission based on 1% of the sale price." (Compl. P 11, Ex. A.)
*fn3"
In February 1994, Plaintiff learned that the Defendants had acquired an interest in Ciga. (Compl. P 12.) Plaintiff requested that Defendants pay the Plaintiff's fee, which request was denied. (Compl. PP 14-15.) Plaintiff then filed this action on November 29, 1994, in New York County Supreme Court. On January 5, 1995, a Notice of Removal was timely
*fn4"
filed in the Southern District of New York and the case assigned to this Court.

Since the Defendant herein does not allege any outright fraud by the Plaintiff, the Court turns to the issue of whether it is possible, based on the pleadings, that Plaintiff has a claim against ITT. Truglia, 692 F. Supp. at 275. The Plaintiff has alleged, and, for purposes of the instant motion, the facts must be resolved in its favor,
*fn6"
that ITT entered into an agreement with Plaintiff, fraudulently misrepresented its intentions to employ Plaintiff, and used Plaintiff's information to acquire Ciga stocks. However, Defendant ITT did not negotiate or sign the contract, nor was it a party to the contract. Plaintiff thus attempts to reach ITT by piercing the corporate veil.

Piercing the corporate veil to expose the parent to liability is permitted "where there is fraud or where [it] is in fact a mere instrumentality or alter ego of its owner." Fletcher, 68 F.3d at 1457 (quoting Geyer v. Ingersoll Publications Co., 621 A.2d 784, 793 (Del. Ch. 1992)). As the Court in Fletcher points out, the Delaware Supreme Court has never explicitly adopted a theory of alter ego parent liability for its subsidiaries, but the lower courts and the United States District Court for the District of Delaware have adopted the standard. Fletcher, 68 F.3d at 1457.

Fraud is not required. Id. However, if there is no fraud then the Plaintiff must show (1) that the parent and the subsidiary "operated as a single economic entity" and (2) that an "overall element of injustice or unfairness . . . [is] present." Id. (quoting Harper v. Delaware Valley Broadcasters, Inc., 743 F. Supp. 1076, 1085 (D. Del. 1990), aff'd, 932 F.2d 959 (3d Cir. 1991)). To determine whether a parent and its subsidiary are a "single economic unit" there are several factors to consider, including:

Whether the corporation was adequately capitalized for the corporate undertaking; whether the corporation was solvent; whether dividends were paid, corporate records kept, officers and directors functioned properly, and other corporate formalities were observed; whether the dominant shareholder siphoned corporate funds; and whether, in general, the corporation simply functioned as a facade for the dominant shareholder.

In the Complaint Plaintiff simply alleges "At all times hereafter mentioned, the defendant ITT-Sheraton is controlled by, and its activities directed by, ITT and its officers and Board of Directors." (Compl. P 5.) Defendants contend this is insufficient, under New York law, to support piercing the corporate veil. While the law of Delaware applies here, the Court agrees that under the law of either jurisdiction Plaintiff's pleadings are insufficient to meet its burden to support a claim of piercing the corporate veil.

The standard requires that Plaintiff plead that ITT and ITT-Sheraton were a single economic entity. Here, there have been no facts advanced in the pleadings to support this claim. There are no facts in the pleadings showing that ITT was inadequately capitalized, that ITT-Sheraton was insolvent, that dividends were not paid, or corporate records improperly kept, or officers and directors functioned improperly, or that ITT siphoned funds from ITT-Sheraton or anything in general that shows ITT was the facade of ITT-Sheraton. Any facts forwarded by the Plaintiff, whether in the Complaint or in the Affidavits,
*fn7"
are insufficient as a matter of law to show that ITT and ITT-Sheraton were a single economic unit.

However, Federal Rule of Civil Procedure 9(b) states that, "in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." "To be sufficient under Rule 9(b) 'a complaint must adequately specify the statements it claims were false and misleading, give particulars as to the respect in which plaintiff contends the statements were fraudulent, state when and where the statements were made, and identify those responsible for the statements.'" L.L. Cool J., 145 F.R.D. at 38 (quoting Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989)); see also DiVittorio v. Equidyne Extractive Indus., Inc., 822 F.2d 1242, 1247 (2d Cir. 1987). Before the Court can even evaluate the possibility of Plaintiff making out a claim of fraud there must be a Complaint that has been properly pled. Here, there is no specificity as to what fraudulent statements were made, when they were made and what agents of ITT, if any, made them. DiVittorio, 822 F.2d at 1247 (where multiple defendants are alleged to have engaged in fraud, the pleader must allege the specific role of each defendant in the fraud). Only Defendant Cryan is mentioned by name; otherwise, the facts alleged in this portion of Plaintiff's Complaint are too general and too sparse. (Compl. at 6-7.) Hence, the Court finds that Plaintiff cannot proceed with a fraud claim based on these pleadings.

Defendant has shown that the Plaintiff has no possibility of a claim at this stage in the proceedings and therefore removal based on fraudulent joinder was proper. Because the Complaint does not plead the legal elements of piercing the corporate veil claim, nor the elements of fraud with the required amount of specificity, the claims against ITT are dismissed.

ITT having been dismissed from the case, the Court now has diversity jurisdiction over the Plaintiff's remaining claims. Hence, Plaintiff's Motion to Remand is hereby denied. Furthermore, Plaintiff's Request to Amend the Complaint is Denied.

SO ORDERED.

Dated: New York, New York

January 19, 1996

Deborah A. Batts

U.S.D.J.

Our website includes the main text of the court's opinion but does not include the
docket number, case citation or footnotes. Upon purchase, docket numbers and/or
citations allow you to research a case further or to use a case in a legal proceeding.
Footnotes (if any) include details of the court's decision.

Buy This Entire Record For
$7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.